Australian economy leads the world

Jessica Wright

Cash bonus ... International Monetary Fund officials in Washington announced today that Australia will have the top-performing economy in the developed world for the next two years. Photo: Bloomberg

Australia has the strongest economy in the developed world and it is expected to outperform all comers for at least the next two years, according to the International Monetary Fund.

The Treasurer, Wayne Swan, said this update is consistent with the reasons he has given for bringing the budget back to surplus, and criticised Tony Abbott for "talking down the economy".

The IMF also forecasts Australia's unemployment rate to remain low at 5.2 per cent in both 2012 and 2013.

The IMF - which issued its World Economic Outlook in Washington overnight - said it expected the Australian economy to expand by 3 per cent this year as fiscal tensions from Europe and the United States continue to ease.

The body stated that after a major setback last year with the Eurozone crisis, the global prospect of far more stable financial conditions was gradually improving.

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The update said that it expects the Australian economy will outstrip growth over all other advanced economies over the next two years, noting we live in a region where exposure to troubled European banks was less than for other parts of the world.

But it also warned that Australia was exposed to risk if economic conditions in the Middle East caused another oil price spike.

The organisation revised up its global growth forecasts, with the global economy expected to grow by 3.5 per cent in 2012, up from 3.3 per cent in the January update.

A forecast of global growth of 4.1 per cent in 2013 has also been revised up from 3.9 per cent.

Global growth continues to be underpinned by solid growth in Asia, the report said.

China's economy was expected to grow 8.2 per cent in 2012 and 8.8 per cent in 2013, while India was expected to grow 6.9 per cent in 2012 and 7.3 per cent in 2013. These forecasts were broadly unchanged from the IMF's January update.

Mr Swan will attend a meeting of the G20 finance ministers in Washington this weekend, with appointments scheduled with IMF managing director Christine Lagarde, the outgoing president of the World Bank, Robert Zoellick, and the chairman of the US Federal Reserve, Ben Bernanke.

Mr Swan said the latest global outlook update was consistent with the reasons he had consistently given for bringing the budget back to surplus.

"The IMF also forecasts Australia's unemployment rate to remain low at 5.2 per cent in both 2012 and 2013," he said.

"With solid growth, low unemployment, contained inflation, strong public finances and a record pipeline of business investment, the Australian economy is the standout performer of the developed world."

Mr Swan said that the chance of the Reserve Bank cutting interest rates was greatly increased by a budget surplus.

"The IMF's confirmation of Australia's strong economic fundamentals - with solid growth and low unemployment - further underscores the importance of returning the budget to surplus, and giving the Reserve Bank maximum flexibility to cut interest rates if it considers that is necessary," he said.

The government has hit out at Opposition leader Tony Abbott for ''getting it wrong'' on the IMF growth forecasts.

During a morning doorstop, Mr Abbott said the IMF report showed the local economy was ''underperforming'', as they had downgraded the economic growth forecast.

''It forecasts 3 per cent for the current financial year and it looks like we are going to get 2 per cent,'' Mr Abbott said.

''This is an underperforming economy and it's underperforming because of the poor economic management of the current government.''

But Mr Abbott's assertion was not correct, according to a spokesman for the Treasurer, who said the growth forecast of 3 per cent in 2012 had been the same since the start of the year.

Mr Swan tweeted from the tarmac before taking off for Washington that it was ''crucial Tony Abbott stops talking down the Aussie economy – describing us as 'underperforming' despite big tick from IMF this morning''.

112 comments

Perhaps you could look at how accurate the IMF is in their forecasts? Then when you realise how badly they get it wrong year after year you could save us from this sort of story.

Commenter

Les

Date and time

April 18, 2012, 12:22PM

Poor Les. Bombarded with fact and truth, he has got a little flustered, having for years believed the tripe and propaganda shoved down his throat. funny with you right wing dills that, when the IMF announced figures that were NOT in support of the Gov, you were all jumping up and down, demanding an immediate election. When the figures disprove your propaanda, "what does the IMF know.... blah blah blah". Wish you lot would pick an arguement, and stick with it.

Commenter

TommyP

Date and time

April 18, 2012, 12:36PM

Maybe so but at least I can spell argument...yet another Labor party stooge who doesn't understand the folly of listening to the IMF...they are a good fit with your lot.

Commenter

Les

Date and time

April 18, 2012, 12:56PM

@TommyP,

I am not going to defend Les on his Lib propaganda - personally I always voted for Labor - except last elections when I have chosen to pay fine because I just could not stand the thought of going to the boxes and voting for the either side.

But purely coincidentally Les is right - IMF does not have a clue.They base their forecast on the delusion that austerity measures prevented European downturn. While in reality these measures made things worse. Sharp drop in consumption will lead to even sharper downturn comparing with the default scenario.

Commenter

Michael

Location

Sydney

Date and time

April 18, 2012, 1:17PM

Les. I have to agree, the evidence on the ground does not fully support the view of the IMF.

If others on this forum think that getting a good report card from the IMF means you are ok. Then how do you expain the poor retail and manufacturing sector results and the over regulation by government?

Commenter

Mike

Location

SYD

Date and time

April 18, 2012, 1:34PM

IF the IMF is wrong,as you say, then Abbott can be wrong as well.The IMF has nothing to gain by their statement.

Abbott has a lot to gain by talking down the economy. He wants to become PM and will do anything to get there.

Just compare the motives of both.

That master of propaganda, Josef Goebbels, said if you tell a lie often enough people will believe it to be the truth.he fooled a nation of over 90 million.

I wonder whether Abbott took lessons from him.His job is easier he only has to fool 51% of 22 million.

@ Michael

Why pay a fine? All you have to do is get your name tocked off on the electoral roll and put a line through the ballot paper and put it in the box. Spend the money on a dinner, you get more from it.

Commenter

caledonia

Location

sydney

Date and time

April 18, 2012, 1:51PM

@ Les

Best in the world is a comparative, not an absolute.

Whether the IMF's prescriptions for solving problems are correct is immaterial - performance are what they're measuring. You're irrelevant to the argument on both counts.

Commenter

BillR

Date and time

April 18, 2012, 2:21PM

TommyP, since when is a forecast "fact and truth"? Our federal government has had budget forecasts completety overshoot every year in the order of tens of $billions, so the "facts and truth" have proved time and again to be anything but the forecasts. Grow up!

Commenter

Twodogs

Location

Sydney

Date and time

April 18, 2012, 2:44PM

@TommyP.Yea right!! I am in the manufacturing industry. My training has taken several years, including tertiary education in engineering.I have thought about retraining but thanks to the Gillards, the Swans and the Browns of this world I would have to become a professional tree hugger at this rate.Are you one of those yet?

Commenter

don't be fooled

Location

Sydney

Date and time

April 18, 2012, 2:53PM

We are the 17th most in debt country in the world per capita.We now sit between Italy who has less debt and Spain who has more.Our debt is 140% GDP compared to the US at 100%. If a housing bust occurs, and foreign investors are betting on it, we will have a sub prime fiasco bigger than the US. What has Swan done about it ? Nothing as per usual.The debt continues to ramp up like an unsustainable Labor leader.So Jofek and et al-You and the Liebor bozos haven't got a clue!